No. 288: An open letter to publishers

To digital publishing executives. Yesterday’s Wall Street Journal published an eye-opening look at one of the best-positioned digital publishers in the industry. Founded in 2008, Vox Media has raised $307.6 million in venture capital and made several key acquisitions. None of these acquisitions are more important than Recode, the tech news site founded by Kara Swisher. At a valuation in excess of $1 billion and nearly 700 employees (via Linkedin), Vox Media is by most accounts, the model venture-backed publisher.

Ryan Pauley, the brand’s talented SVP of biz ops and strategy also serves as the head of Concert, Vox Media’s attempt to platformize their sophisticated advertising operations. And recently, the company launched “The Goods”, the media conglomerate’s editor-driven attempt at driving affiliate commerce.

The Goods by Vox’s editorial team will publish a range of news, features, ongoing series, videos and Explainers each weekday. There will be an email newsletter delivering The Goods by Vox content to your inbox twice per week.

Vox’s Deputy Managing Editor Eleanor Barkhorn will oversee The Goods by Vox, as well as a team of talented reporters and editors, including Editor Julia Rubin and Deputy Editors Meredith Haggerty and Alanna Okun.

This doesn’t sound like the profile of a company that will struggle to reach $185 million in 2018 revenue but it is so. Digital advertising’s collapse is diminishing or has diminished several top publishers: Vice, Mashable, The Outline, and Buzzfeed. And there is no end in sight, as long as the duopoly of Facebook and Google persists.

2PM Data

One consistency that you’ll find across many of these media platforms, amidst sagging performance, is the outsized cost of managing advertising executives.

In August, Vox Media announced internally a reorganization of its advertising sales workforce, creating one team to handle major categories and accounts and another to focus on cultivating new business. In April, the company promoted Chief Marketing Officer Lindsay Nelson to become its chief commercial officer in charge of leading revenue growth efforts.

One study places the average salary for lower level advertising sales employees at $120,000+ per year, cutting into companies’ gross margins while deepening the dependency on these personnel investments. Meanwhile, commerce operations are often reduced to inconsequential merch operations.

Vox Media: SB Nation’s Shopify store

But not everyone in the industry sees it this way. Buzzfeed has one of the most robust commerce operations in the industry. In a recent report by The Information, Jonah Peretti’s strategy was laid bare:

Late last year, Mr. Peretti unveiled his “Nine Boxes” strategy in an employee memo outlining the areas the company was focusing on to increase revenue. They included ecommerce, programmatic ads and BuzzFeed News making TV shows for streaming services and TV networks. The goal of the memo was to provide clarity to employees about where they stood in the company’s strategy, one thing some employees had said was missing, Mr. Peretti said.

Publishers must begin deemphasizing digital advertising to invest in direct-to-consumer (DTC) commerce teams. These commerce teams should be equipped to handle all affiliate operations, in line with the brand’s strategy for commerce and advertising. Affiliate commerce operations is not a suitable role for journalists; they should focus on their crucial, core competency: creating and building community around their content. They are the priority!

The digital landscape is changing beneath our feet. For publishers to continue building organic readership, they must become brands. Operating as a source of content is no longer enough. To do that, efforts can no longer be siloed, the traditional factions of legacy-styled newsrooms must fall.

There are publishers who are doing this successfully. In No. 252, 2PM took a deep dive into content and commerce. We recognized the media brands that drive meaningful operational margins with DTC commerce. Of these media brands, Uncrate may have the most notable blueprint for a publishing revenue ecosystem. The company generates revenue with (1) well-performing display ads, (2) a coveted native advertising offering, and an (3) online store featuring direct access to a curation of the brands most desired by the publisher’s target demo.

When this flavor of revenue operations works alongside a team focused on delivering relevant content, these three revenue components actually feed an aggregate growth in viewership, advertising interest, and social referrals. Investments into commerce operations indicate that digital publishers have prioritized the growth of self-sustaining ecosystems void of reliance on Google and Facebook. While publishers need the duopoly of Silicon Valley advertising giants, their pie is growing at your expense.